USD/JPY: Trading the US Existing Home Sales Jan 2014

The US Existing Home Sales indicator is released monthly, and provides analysts with a snapshot of the health and direction of the housing sector. A higher reading than the market prediction is bullish for the dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

Published on Thursday at 15:00 GMT.

Indicator Background

Existing Homes Sales helps measure of the strength of the US housing market, one of the most important sectors in the economy. As a new house is likely to be the largest purchase that a consumer will make, home sales are a critical component for economic growth.

The indicator has been dropping since September, raising concerns about the health of the US housing market. The November release dropped to 4.90 million, down from 5.12 million a month earlier. The estimate for December calls for a slight improvement, with a forecast of 4.94 million.

Sentiments and levels

The  Federal Reserve’s tapering  program is underway and with further moves expected early in 2014, the yen could  remain under strong pressure.  As well, the Bank of Japan  is  moving full steam ahead with  its current aggressive monetary program, which could lead to further weakening of the Japanese currency. The yen  staggered out  of 2013 battered and bruised,  as the currency  lost about 17% of its value over the  course of  the year.  With many key US releases pointing upwards, we could see the yen’s downward spiral continue.  So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 106.66, 105.70, 104, 102.50,  101.44 and 100.85.

5 Scenarios

1. Within expectations: 4.84M to 5.04M: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 5.05M to 5.15M: An unexpected higher reading can send USD/JPY above one resistance line.
3. Well above  expectations: Above 5.15M: A sharp increase could propel the pair above a second  resistance line.
4. Below expectations: 4.73M to 4.83M: A weak reading could send USD/JPY below one support level.
5. Well below expectations: Below 4.73M. In this outcome, the pair could break a second support level.

For more on the yen, see the USD/JPY forecast.

To follow this event live:     [do action=”calendar-event” eventid=”498e8a5b-db64-4a50-afb0-4ccd072bc95a”/]